This Week in Car Buying: Top deals of the month; Incentive tsunami; Higher prices, for now; Gas prices continue to fall
Big rebates and lease deals spread across auto makers ranges include everything from economical compacts through luxury sedans. Even some recently introduced all-new models are not immune from incentives designed to keep industry sales rolling. Much of this activity comes as the model year winds down and dealers gear up for the Labor Day and model closeout sales events over the next few weeks.
“August is a great time to strike a deal on a new 2016 model-year vehicle, as dealers are in the height of the summer sell-down preparing their lots for the coming onslaught of 2017 models,” said Jack. R. Nerad, executive editorial director and executive market analyst for KBB.com “This month’s list includes the best-selling car in the country, an all-new SUV and a pair of appealing luxury sedans.”
The top deal of the month is the 2016 Ford Focus, which is being offered with a $3,450 rebate along with 0-percent financing. Hyundai’s 2016 Veloster hatchback, a sporty compact with two doors on the passenger side and one door on the driver’s side, is eligible for $3,250 cash back from the Korean automaker. On the leasing side of the ledger, two volume models, the 2016 Nissan Rogue and 2016 Toyota Camry, are being offered with 3-year leases at $189 per month. The former requires $1,899 down, the latter, $1,999.
Family car buyers have plenty of other 4-door sedans to choose from, including the 2016 Hyundai Genesis, which has $299 per month 3-year lease with $2,999 down; the 2016 Volkswagen Passat available with $1,000 cash back and 0-percent financing, and the 2016 Dodge Charger, which has a zero- down/$309 per month 3-year lease.
In the luxury arena, Cadillac is offering $3,000 cash back and 0-percent financing on its entry-level 2016 ATS sedan and coupe, while the midsize 2016 Lexus GS 200t boasts a $399 per month 3-year lease with $1,999 due at signing. The recently introduced and all-new 2016 Buick Envision SUV is touting a $299 per month/39-month lease with $4,479 due at signing.
As we get closer to the Labor Day Weekend sales events, the pace of new incentives is likely to increase. Automotive News notes that even though July sales were up 1.1 percent over a year ago, the Detroit 3 boosted incentive spending by $655 per car or 18 percent over July 2015 levels in citing numbers from Autodata. The shift towards bigger spending was more pronounced among luxury makes, with the same data showing that BMW’s increased its incentives $1,884 or 42 percent and Volvo’s climbed by 25 percent or $839 per car. The industry average incentive is up $337 or 11 percent.
Mark LeNeve, Ford Motor Co.’s vice president for U.S. marketing, sales and service is quoted in the trade journal as saying “I think it’s an indication in a plateauing market that the major players are going to protect share. It’s a more competitive market that we’ve experienced in the last five or six years.”
While sales remain at near record levels, this plateau represents a shift in balance towards the consumer with the rising incentives portending a buyer’s market. Further pushing the industry in this direction is the high number of late model used cars coming off lease and the proliferation of manufacturer-sponsored Certified Pre-Owned programs. If the manufacturers can keep up the current sales pace and offer good deals snapped up by smart buyers, it will be a win-win situation for all concerned.
Higher prices, for now
Average transaction prices for new vehicles continue to increase, but this may prove to be a lagging indicator that will change as higher incentives begin to be felt across the board. Still, the ATP for light vehicles hit $34,264 in July, up $832 or 2.5 percent from a year earlier and $82 higher than June. These higher prices may be a result of buyers adjusting their approach to acquiring new vehicles.
“Low interest rates, longer loan terms and increasing leasing are helping consumer afford their monthly payments, which would be upwards of $550 per month on a traditional 60-month loan,” said Tim Fleming, an analyst for Kelley Blue Book. “As the price gap to late-model used cars increases, more shoppers may turn to the pre-owned market for their vehicle, which could mark a big departure from new-car sales growth the industry has seen during the past five years.”
Midsize pickups seem to be the driving force behind ATP gains at Toyota and GM. The refreshed Tacoma has seen its average price climb by 12 percent, while the Chevy Colorado and GMC Canyon figure prominently in GM’s overall 3.3 percent gain in July. Transaction prices for midsize pickups grew by 7.1 percent exceeded only by sports cars (7.3 percent) and followed closely by large luxury cars (7.0 percent). The biggest drop in prices occurred among electric vehicles which declined by 4.0 percent, fueled in part by Tesla introducing lower-cost versions of both the Model S and Model X.
Gas prices continue to fall
Buyer interest in crossovers, SUVs and trucks over traditional cars and hybrids is being fueled by low gas prices, a situation that isn’t likely to change in the near future. While regulators are counting on high energy prices to shift motorists into smaller, more fuel efficient and alternative-power vehicles, the glut of oil on the market continues to exert downward pressure on the average price of a gallon of gasoline.
The federal government’s Energy Information Administration predicts that gasoline will fall below $2 per gallon on average in October and is expected to stay at that level through winter. EIA’s prediction is for $1.95 per gallon for regular gas nationally, down from last month’s $2.07 per gallon. The high supplies of crude are also reflected in the pricing of futures, which are down 5 percent per barrel of oil and 20 percent for gasoline.
“High gasoline production is leading to motor fuel inventories that are the highest on record for this time of year, which is helping to keep prices down at the pump,” said a statement from EIA Administrator Adam Sieminski.
The Hyundai Genesis Coupe will go out of production after the 2016 model year. The rear-drive 2-door will be supplanted by a more upscale coupe as Genesis becomes a luxury brand.
Ford has brought back the STX trim level for the F-150 and made it available for the first time on Super Duty models. Read about the 2017 Ford F-150 and Super Duty STX models here.
The EPA has certified 2017 BMW diesels for sale. The new models include 2017 328d Sedan, 328d Sports Wagon, X3 xDrive28d, and the X5 xDrive35d.
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